Technology stocks are all the rage on Wall Street these days. Artificial intelligence is seemingly sucking up all the hype and investors’ money in the process. That’s left some bargains in other market areas, including the industrial sector.
It can be tempting to chase the hot thing, but there are generous investment returns to be had by going where others aren’t. These three industrial stocks are blue chip industry stalwarts that have fallen to attractive prices for long-term investors.
Here is what you need to know.
1. Enterprise Products Partners
Midstream energy company Enterprise Products Partners (NYSE: EPD) is a crucial cog in America’s energy picture. Midstream companies operate vast pipelines and storage facilities that help transport oil, natural gas, and other products. Enterprise Products’ pipeline network spans over 50,000 miles, transporting materials from exploration sites to refineries and exports. The company is a master limited partnership (MLP), a business structure with certain tax advantages.
Importantly for investors, MLPs like Enterprise Products Partners generally pay large distributions (what MLPs call dividends) with high yields. The stock yields a whopping 7.3% at its current share price, backed by enough distributable cash flow to cover the dividend almost twice over. While a high yield can signal financial stress for many companies, investors can trust this stock to continue sending you cash. Enterprise Products Partners has raised its distribution for 25 consecutive years and counting.
Today, the stock trades at just over 10 times earnings, while analysts believe earnings will grow by an average of 7% to 8% annually for the next three to five years. That’s an attractive price tag for growth investors. Add in that hefty dividend, and Enterprise Products Partners stands out as a stellar investment idea with potential double-digit investment returns.
2. Chevron
Integrated oil company Chevron (NYSE: CVX) does a little of everything in oil and gas; the company has both upstream (exploration) and downstream (refining) operations, which makes it a well-rounded energy company that has successfully navigated the industry’s ups and downs for many decades.
The oil and gas business can be competitive, but Chevron’s size and quality assets give it an advantage over most of its peers. Chevron has a significant presence in the Permian Basin, a resource-rich region in the southern United States.
Chevron’s ability to endure fluctuating oil and gas prices (low prices can hurt exploration companies’ profits) has made it a dependable dividend stock. The company has paid and raised its dividend for 37 consecutive years and spent 56% of this year’s earnings on dividends. High commodity prices in recent years have turned on the cash spigot for Chevron, which has cleaned up its balance sheet to near its lowest debt-to-equity ratio in years.
That positions Chevron to endure the pain of a down market again and continue putting cash in shareholders’ pockets. Looking too far ahead is difficult because you never know when a downturn in oil and gas markets will tank prices and take Chevron’s earnings with it. That’s life for a cyclical business. Investors should consider dollar-cost averaging into the stock to collect that dividend while leaving room to be opportunistic during the next major downturn.
3. Deere & Company
You might be familiar with Deere & Company (NYSE: DE); the company’s famous dark green paint is on virtually every piece of machinery it makes. Deere manufactures and sells a variety of machinery for jobs as small as mowing your lawn or as large as clearing a forest. The company also makes money by financing purchases and on service and maintenance. Deere has existed since the early 1800s, building its sterling reputation over the course of centuries.
Deere is a cyclical company that can hurt when a recession prevents farmers and other customers from investing in its machinery. Still, it can be an outstanding dividend stock to own for the long haul. Management has prudently guided the business through ups and downs, even occasionally freezing the dividend to conserve cash.
However, the stock is a total returns beast that delivers enough during the good times to compensate for how lumpy the journey can be. Shares have outperformed the S&P 500 going back to the 1980s.
Reduced agricultural demand is slowing business and driving the stock to near 52-week lows. But things could soon look up. Analysts believe the company’s earnings will grow by nearly 10% annually over the next three to five years. The stock trades at a forward P/E of 14, which could be a launch pad for great investment returns.
Should you invest $1,000 in Chevron right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Deere & Company and Enterprise Products Partners. The Motley Fool has a disclosure policy.
3 Blue Chip Dividend Stocks to Buy Hand Over Fist in June was originally published by The Motley Fool
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